The Wall Street Journal Online
When Melinda Roberts found shingles in her front yard after a storm, her insurer didn't dispatch a claims adjuster to investigate. It sent a drone.
The unmanned aircraft hovered above Ms. Roberts' three-bedroom Birmingham, Ala., home and snapped photos of her roof. About a week later a check from Liberty Mutual Insurance arrived to cover repairs.
"It took a lot less time than I was expecting," Ms. Roberts said.
Drones, photo-taking apps and artificial intelligence are accelerating what has long been a clunky, time-consuming experience: the auto or home-insurance claim.
Traditionally, an insurance claim associated with minor home damage or fender-bender auto accidents started with a phone call from a customer and ended days or weeks later with a mailed check. In between the insurer often would send an inspector to investigate the situation in person.
But about four in 10 car insurers no longer use employees to physically inspect damage in some cases, according to a LexisNexis Risk Solutions survey of insurance executives. Claims that rely on greater automation can be handled in two to three days compared with 10 to 15 days for a more traditional approach that involves an in-person visit, according to the survey.
One new home insurer, Lemonade, drew attention in January when it said it took just three seconds for its artificial-intelligence claims bot to settle and pay a claim for a stolen jacket.
Insurers typically guard their claims-handling times as industry secrets. But some said the time for a customer to get a price estimate and receive a payment is speeding up, and the change could make it more likely that policies are renewed.
A faster process can also save insurers money. About 11 cents of every premium dollar in personal property-and-casualty insurance is spent on investigating and settling claims, according to S&P Global Market Intelligence.
Automation can reduce the size of payouts, too. "The faster you can settle a claim, typically the less you can settle it for, so there is a direct financial incentive," said Matthew Josefowicz, chief executive of insurance-technology consulting firm Novarica. Claims like water damage can get worse if they aren't addressed quickly, he said.
Speed can have drawbacks. Some auto-repair shop industry groups have argued that photo-based appraisals can overlook significant damage and actually slow the claims process.
"It's great to speed up certain parts of the process, [but] to think that one photograph, one piece of code or one algorithm is the Holy Grail, I think is a bit of a misnomer," said Andrew Newman, president of reinsurance broker Willis Re.
Delaware, Pennsylvania and Virginia changed their regulations last year to allow appraisers to base car-repair estimates on photos or videos, but Massachusetts and Rhode Island still have some restrictions on photo appraisals.
Chicago startup Snapsheet helps car insurers with photo appraisals, using artificial intelligence to speed up the process. It takes up to three hours for the company to produce a price estimate after a customer submits photos of a damaged car, according to CJ Przybyl, the company's president.
For claims involving more minor damage, the processing time is expected to drop dramatically as automation continues. A car-insurance claim is currently handled by an average of three employees, said Bill Brower, vice president of claims at RELX Group's LexisNexis Risk Solutions—the same number as when he started working in the industry in the 1980s.
Soon, the entire claims process—from notifying insurance companies when damage occurs to estimating repair costs based on photos—could be done with no human input, he said. LexisNexis Risk Solutions helps insurers streamline their claims processes.
"We're on the cusp of this major, major change" in claims handling, Mr. Brower said. "Consumers' expectations have changed."
At Lemonade, customers already file claims by chatting with a bot through the Lemonade app, uploading relevant photos and recording videos of themselves describing the loss. The company's algorithms run 18 antifraud tests, said Daniel Schreiber, Lemonade's chief executive.
The New York company said about one-fourth of its claims are settled and paid automatically, with the rest being passed on to a team of humans to assess. Lemonade launched in September and now sells policies in four states.
Allstate Corp. told car-repair shops in March that it is asking customers to send photos of car damage through its app rather than using drive-in inspection centers. The switch cut the time for a customer to get an estimate from several days to about 13 hours, an Allstate executive told repair shops in a May letter.
"We give customers their money in hours, not in days," Allstate Chief Executive Tom Wilson said in a May conference call. "It's cheaper, better and faster."
At Liberty Mutual, adjusters are now using drones daily to photograph home damage, said Lily Wray, the company's vice president of claims innovation for U.S. consumer markets. It is one of several insurance companies that have received federal approval in recent years to use or test unmanned aircraft to inspect everything from hail-damaged roofs to collapsed buildings.
"We're taking something that takes hours down to minutes," she said.
Insurers say drones will improve their ability to swiftly respond to claims from hurricanes, tornadoes and floods by providing aerial images of places claims adjusters can't always access. They also see drones as a way to reduce injuries from risky roof inspections.
Ms. Roberts, the Liberty Mutual customer with roof damage in Alabama, was relieved that the insurer's drone saved a claims adjuster a climb to the top of her house.
"I would much rather have it done that way than have him call me and tell me he's fallen off my roof," she said.
Write to Nicole Friedman at firstname.lastname@example.org
This article was licensed through Dow Jones Direct.
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